SECURITIES AND EXCHANGE COMMISSION
FORMForm 10-K
Annual Report Pursuant to SectionANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange Act of 1934OF
For the Fiscal Year Ended December 31, 200128, 2002
Commission File Number 1-4171
KELLOGG COMPANYKellogg Company
Delaware (State of Incorporation) | 38-0710690 | |
| (I.R.S. Employer Identification No.) |
One Kellogg Square
Registrant’s Telephone Number: (616)(269) 961-2000
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: Common Stock, $0.25 par value per share | Name of each exchange on which registered: | |
| New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x[X] No o[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o[ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [ ]
The aggregate market value of the common stock held by non-affiliates of the registrant (assuming only for purposes of this computation that the W.K. Kellogg Foundation Trust, directors and executive officers may be affiliates) was $9,400,548,687$8,490,635,459 as determined by the March 4, 2002,3, 2003, closing price of $34.00$30.01 for one share of common stock, as reported for the New York Stock Exchange — Composite Transactions.
As of March 4, 2002, 407,680,5633, 2003, 410,832,118 shares of the common stock of the registrant were issued and outstanding.
Portions of the registrant’s Annual Report to Share Owners for the fiscal year ended December 31, 2001,28, 2002, are incorporated by reference into Part I, II, and Part IV of this Report.
Portions of the registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission for the Annual Meeting of Share Owners to be held April 26, 2002,25, 2003, are incorporated by reference into Part III of this Report.
Item 1. Business
The Company.Kellogg Company, incorporated in Delaware in 1922, and its subsidiaries are engaged in the manufacture and marketing of ready-to-eat cereal and convenience foods.
Kellogg Company acquired Keebler Foods Company in a transaction valued at $4.56 billion, which closed on March 26, 2001. In connection with the acquisition, Kellogg Company paid approximately $3.86 billion in cash and assumed $696 million of debt, with $560 million of the assumed debt being refinanced on the acquisition date.
The address of the principal business office of Kellogg Company is One Kellogg Square, P.O. Box 3599, Battle Creek, Michigan Creek 49016-3599. Unless otherwise specified or indicated by the context, the term “Company” as used in this report means Kellogg Company, its divisions and subsidiaries.
Information about the Keebler Foods Company acquisition is incorporated by reference from “Keebler acquisition” on page 25 of the Company’s Annual Report.
Financial Information About Segments.The information called for by this Item is incorporated herein by reference from Note 14 to the Consolidated Financial Statements on page 42pages 46 and 47 of the Company’s Annual Report.
Principal Products.The principal products of the Company are ready-to-eat cereals and convenience foods, such as cookies, crackers, toaster pastries, cereal bars, frozen waffles, meat alternatives, pie crusts, and ice cream cones. These products were, as of December 31, 2001,28, 2002, manufactured by the Company in 19 countries and distributedmarketed in more than 160180 countries. The Company’s cereal products are generally marketed under theKellogg’sname and are sold principally to the grocery trade through direct sales forces for resale to consumers. The Company uses broker and distribution arrangements for certain products. It also generally uses these, or similar arrangements, in less-developed market areas or in those market areas outside of its focus.
The Company also markets cookies, crackers, and other convenience foods, of its Keebler Foods Company subsidiary under other brands such asKellogg’s, Keebler, Cheez-It, Murray,andFamous Amos and manufactures private label cookies, crackers, and other products. These branded products are generally marketed, to supermarkets in the United States through a direct store door (DSD) delivery system, although other distribution methods are also used. The Company also markets some of its other convenience foods products in the United States through this DSD system.
Additional information pertaining to the relative sales of the Company’s products for the years 19992000 through 20012002 is found in Note 14 to the Consolidated Financial Statements on page 42pages 46 and 47 of the Company’s Annual Report.
Raw Materials.Agricultural commodities are the principal raw materials used in the Company’s products. Cartonboard, corrugated, and plastic are the principal packaging materials used by the Company. World supplies and prices of such commodities (which include such packaging materials) are constantly monitored, as are government trade policies. The cost of such commodities may fluctuate widely due to government policy and regulation, weather conditions, or other unforeseen circumstances. Continuous efforts are made to maintain and improve the quality and supply of such commodities for purposes of the Company’s short-term and long-term requirements.
The principal ingredients in the products produced by the Company in the United States include corn grits, wheat and wheat derivatives, oats, rice, cocoa and chocolate, soybeans and soybean derivatives, various fruits, sweeteners, wheat, and wheat derivatives. These commodities are purchased principally from sources in the United States. In producing convenience foods products, the Company may use flour, shortening, sweeteners, dairy products, eggs, fruit, chocolate, and other filling ingredients, which ingredients are obtained from various sources. Most of these commodities are purchased principally from sources in the United States.
The Company both enters into long-term contracts for the commodities described in this section and purchases these items on the open market, depending on the Company’s view of possible price fluctuations, supply levels, and the Company’s relative negotiating power. While the cost of some of these commodities has, and may continue to, increase over time, the Company believes that it will be able to purchase an adequate supply of these items as needed. The Company also uses commodity futures and options to hedge some of its costs.
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Raw materials and packaging needed for internationally based operations are available in adequate supply and are sometimes imported from countries other than those where used in manufacture.
Cereal processing ovens at major domestic and international facilities are regularly fueled by natural gas or propane, commodities obtained from local utilities or other local suppliers. Short-term standby propane storage exists at several plants for use in the event of interruption in natural gas supplies. Oil may also be used to fuel certain operations at various plants in the event of natural gas shortages or when its use presents economic advantages. In addition, considerable amounts of diesel fuel are used in connection with the distribution of the Company’s products.
Trademarks and Technology.Generally, the Company’s products are marketed under trademarks it owns. The Company’s principal trademarks are its housemarks, brand names, slogans, and designs related to cereals and convenience foods manufactured and marketed by the Company as well as licensed uses of these marks on various goods. These trademarks includeKellogg’sfor cereals and convenience foods and other products of the Company, and the brand names of certain ready-to-eat cereals, includingAll-Bran, Apple Jacks, Bran Buds, CompleteBran Flakes,CompleteWheat Flakes, CocoaRice Krispies, Choco Krispies,Cinnamon Crunch Crispix, Common Sense, Corn Pops, Cruncheroos, Kellogg’s Corn Flakes, Cracklin’ Oat Bran, Crispix, Froot Loops, Kellogg’s Frosted Flakes, Frosted Mini-Wheats, Frosted Krispies, Just Right, Kellogg’sLow Fat Granola,Nut & Honey Crunch, Nut & Honey CrunchO’s,Mueslix, Nutri-Grain, Product 19, Two ScoopsRaisin Bran,Rice Krispies, Raisin Bran Crunch, Smacks, Smart Start, Special K, Special KRed Berries, andKellogg’s Honey Crunch Corn Flakesin the United States and elsewhere;Zucaritas, Choco Zucaritas, Sucrilhos, SucrilhosChocolate,SucrilhosBanana,Vector, Musli,andChoco Krispisfor cereals in Latin America;ViveandVectorin Canada;Choco Pops, Chocos, Frosties, Muslix, Fruit ’n’‘n’ Fibre, Kellogg’s Crunchy Nut Corn Flakes, Kellogg’s Crunchy Nut Red Corn Flakes, Honey Nut Loops, Kellogg’s Extra, Sustain, Mueslix, Country Store, Ricicles, Smacks, Start, Smacks Choco Tresor, Pops,andOptimafor cereals in Europe; andCerola, Sultana Bran, Supercharged, Chex, Frosties, Goldies, Rice Bubbles, Kellogg’s Iron Man Food,andBebigBe Bigfor cereals in Asia and Australia. Additional Company trademarks are the names of certain combinations ofKellogg’sready-to-eat cereals, includingHandi-Pak, Snack-Pak, Snack-A-Longs, Fun Pak, Jumbo,andVariety Pak. Other Company brand names includeKellogg’sCorn Flake Crumbs;Croutettesfor herb season stuffing mix;Kuadri Krispies, Zucaritas, Special K,andCruslifor cereal bars,Keloketasfor cookies,Kompletefor biscuits; andKaosfor snacks in Mexico;Mexico and elsewhere in Latin America;Pop-Tarts Pastry Swirlsfor toaster danish;Pop-TartsandPop-Tarts Snak-Stixfor toaster pastries;Eggo, Special K, Waf-fulls,andNutri-Grainfor frozen waffles and pancakes;Toaster Muffin Delightsfor toaster muffins;Rice Krispies Treatsfor baked snacks and convenience foods;Rice Krispies Treats Krunchfor popcorn;Nutri-GrainandNutri-Grain Twistsfor convenience foods in the United States and elsewhere;K-Time, Rice Bubbles, Day Dawn, Be Natural, SunibriteandLCMsfor convenience foods in Asia and Australia;Kompletefor biscuits;Nutri-GrainSquares,Nutri-Grain Elevenses,Elevenses, andRice Krispies Squaresfor convenience foods in Europe;Windersfor fruit snacks in the United Kingdom;Kellogg’s Kravefor refueling snack bars;Kashifor certain cereals, nutrition bars, and mixes;Vectorfor meal replacement products; andMorningstar Farms, Loma Linda, Natural Touch,andWorthingtonfor certain meat and dairy alternatives.
The Company also markets convenience foods under trademarks and tradenames which includeKeebler, Cheez-It, E. L. Fudge, Murray, Famous Amos, Austin, Ready Crust, Chips Deluxe, Club, Fudge Shoppe, Hi-Ho, Hydrox, Sunshine, Munch’Ems, Sandies, Soft Batch, Toasteds, Town House, Vienna Fingers, Wheatables,andZesta. A subsidiaryOne of the Keebler Foods subsidiaryits subsidiaries is also the exclusive licensee of theCarr’sbrand name in the United States.
Company trademarks also include logos and depictions of certain animated characters in conjunction with the Company’s products, includingSnap!Crackle!Pop!forRice Krispiescereals andRice Krispies Treatsconvenience foods;Tony the TigerforKellogg’s Frosted Flakes, Zucaritas, SucrilhosandFrostiescereals and convenience foods;Ernie Elffor cookies; the HollowHollow Treelogo for certain convenience foods;Toucan SamforFroot Loops; Dig ’Em‘EmforSmacks; Coco MonkeyforCocoa Krispies; CorneliusforKellogg’s Corn Flakes; Melvinthe elephant for certain cereal and convenience foods;Chocosthe Bear andKobithe Bear for certain cereal products andEet & Ernfor an internet-based consumer promotional program.
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The slogansThe Best To You Each Morning, The Original and Best, They’re Gr-r-reat!,andEat it For Breakfast, Eat it For Life,used in connection with the Company’s ready-to-eat cereals, along withL’ Eggo my Eggo,used in connection with the Company’s frozen waffles and pancakes, andElfin Magicused by the Keebler Foods subsidiary in connection with convenience food products are also important Company trademarks.
The trademarks listed above, among others, when taken as a whole, are important to the Company’s business. Certain individual trademarks are also important to the Company’s business. Depending on the jurisdiction, trademarks are generally valid as long as they are in use and/or their registrations are properly maintained and they have not been found to have become generic. Registrations of trademarks can also generally be renewed indefinitely as long as the trademarks are in use.
The Company considers that, taken as a whole, the rights under its various patents, which expire from time to time, are a valuable asset, but the Company does not believe that its businesses are materially dependent on any single patent or group of related patents. The Company’s activities under licenses or other franchises or concessions which it holds are similarly a valuable asset, but are not believed to be material.
Seasonality.Demand for the Company’s products has generally been approximately level throughout the year, although some of the Company’s private label convenience foods generally have stronger demand in the first quarter and the Company’s other convenience foods have a bias for stronger demand in the second half of the year due to events and holidays. The Company also custom-bakes cookies for the Girl Scouts of the U.S.A., which are principally sold in the first quarter of the year.
Working Capital.Although terms vary around the world, in the United States the Company generally has required payment for goods sold 11 days subsequent to the date of invoice, generally with a 2% or 1% discount allowed for payment within ten days. Receipts from goods sold, supplemented as required by borrowings, provide for the Company’s payment of dividends, capital expansion, and for other operating expenses and working capital needs.
Customers. Historically, the Company has not been dependent on any single customer or a few customers for a material part of its sales. However, theThe Company’s largest customer, Wal-Mart Stores, Inc. and its subsidiaries, accounted for approximately 11%12% of consolidated net sales during 2001,2002, comprised principally of sales within the United States. Correspondingly, at December 31, 2001,28, 2002, approximately 7%9% of the Company’s consolidated receivables balance and 11%13% of the Company’s U.S. receivables balance was comprised of amounts owed by Wal-Mart Stores, Inc. and its subsidiaries. During 2001,2002, the Company’s top five customers, collectively, accounted for approximately 18%30% of both the Company’s consolidated net sales and approximately 40% of U.S. net sales. There has been significant worldwide consolidation in the grocery industry in recent years and the Company believes that this trend is likely to continue. Although the loss of any large customer for an extended length of time could negatively impact the Company’s sales and profits, the Company does not anticipate that this will occur to a significant extent due to the consumer demand for the Company’s products and the Company’s relationships with its customers. Products of the Company have been generally sold through its own sales forces and through broker and distributor arrangements and have been generally resold to consumers in retail stores, restaurants, and other food service establishments.
Backlog.For the most part, orders are filled within a few days of receipt and are subject to cancellation at any time prior to shipment. The backlog of any unfilled orders at December 31, 2001,28, 2002, and December 31, 2000,2001, was not material to the Company.
Competition.The Company has experienced, and expects to continue to experience, intense competition for sales of all of its principal products in its major product categories, both domestically and internationally. The Company’s products compete with advertised and branded products of a similar nature as well as unadvertised and private label products, which are typically distributed at lower prices, and generally with other food products with different characteristics.products. Principal methods and factors of competition include new product introductions, product quality, composition and nutritional value, price, advertising, and promotion.
Research and Development.Research to support and expand the use of the Company’s existing products and to develop new food products is carried on at the W.K. Kellogg Institute for Food and Nutrition Research in Battle Creek, Michigan, and at other locations around the world. The Company’s expenditures for research
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Regulation.The Company’s activities are subject to regulation by various government agencies, including the Food and Drug Administration, Department of Agriculture, Federal Trade Commission, and Department of Commerce in the United States, and various state and local agencies, as well as similar agencies outside of the United States.
Environmental Matters.The Company’s facilities are subject to various foreign, federal, state, and local laws and regulations regarding the discharge of material into the environment and the protection of the environment in other ways. The Company is not a party to any material proceedings arising under these regulations. The Company believes that compliance with existing environmental laws and regulations will not materially affect the consolidated financial condition or the competitive position of the Company. The Company is currently in substantial compliance with all material environmental regulations affecting the Company and its properties.
Employees.At December 31, 2001,28, 2002, the Company had approximately 26,42425,700 employees.
Financial Information About Geographic Areas.The information called for by this Item is incorporated herein by reference from Note 14 to the Consolidated Financial Statements on page 4246 of the Company’s Annual Report.
Availability of Reports; Website Access. Our internet address ishttp://www.kelloggcompany.comand “Investor — Why Invest — SEC Filings” on our home page has, since November, 2002, provided a hyperlink to the 10kWizard.com web site. Through that hyperlink, we make available free of charge our Board of Directors proxy statements, annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.
Forward-Looking Statements.This Report contains, or incorporates by reference, “forward-looking statements” with projections concerning, among other things, the Company’s strategy and plans; integration activities,exit plans and costs and savings related to the Keebler acquisition; cash outlaysgrowth, margins and savings related to restructuring actions;profitability; products and promotions; the impact of accounting changes; our ability to meet interest and debt principal repayment obligations; working capital; future common stock purchases; effective income tax rate; amortization expense; cash flow; property addition expenditures; interest expense; commodity prices; health care and interest expense.pension costs; and realizability of the carrying value of intangibles and other assets. Forward-looking statements include predictions of future results or activities and may contain the words “expect,” “believe,” “will,” “will deliver,” “anticipate,” “project,” “should,” or words or phrases of similar meaning. For example, forward-looking statements are found in this Item 1 and in several sections of Management’s Discussion and Analysis incorporated by reference. The Company’s actual results or activities may differ materially from these predictions. In particular, future results or activities could be affected by factors related to the Keebler acquisition, including integration problems, failures to achieve synergies, unanticipated liabilities, and the substantial amount of indebtedness incurred to finance the acquisition, which could, among other things, hinder the Company’s ability to adjust rapidly to changing market conditions, make the Company more vulnerable in the event of a downturn, and place the Company at a competitive disadvantage in relation to less-leveraged competitors. The Company’s future results could be affected by a variety of other factors, including competitive conditions in our markets and categories and their impact; pricing and promotional and marketing spending levels and/or incremental pricing actions by the Company or others and their effect on actual volumes and product mix; actual market performance of benefit plan trust investments; the effectiveness of advertising and marketing spending or programs; the success of innovations and new product introductions; the levels of spending on system initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; the availability of and interest rates on short-term financing; changes in consumer behavior and preferences; commodity priceprices and labor cost fluctuations; expenditures necessary to carry out restructuring initiatives and savings derived therefrom;costs; U.S. and foreign economic conditions, including foreign currency exchangeconversion controls and rate fluctuations; changes in statutory tax and other laws; business disruption from terrorist acts or a nation’s responsepolitical unrest or responses to them; changes in U.S. or foreign regulations affecting the food industry; the success of productivity improvements and foreign regulations;business
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Item 2. Properties
The Company’s corporate headquarters and principal research and development facilities are located in Battle Creek, Michigan.
The Company operated, as of December 31, 2001,28, 2002, manufacturing plants and warehouses totaling more than 1718 million (17,000,000)(18,000,000) square feet of building area in the United States and other countries. The
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Outside the United States, the Company had, as of December 31, 2001,28, 2002, additional manufacturing locations, some with warehousing facilities, in Argentina, Australia, Brazil, Canada, China, Colombia, Ecuador, Germany, Great Britain, Guatemala, India, Japan, Mexico, South Africa, South Korea, Spain, Thailand, and Venezuela.
The principal properties of the Company, including its major office facilities, generally are owned by the Company, although some manufacturing facilities are leased, and no owned property is subject to any major lien or other encumbrance. Distribution facilities and offices of non-plant locations typically are leased. In general, the Company considers its facilities, taken as a whole, to be suitable, adequate, and of sufficient capacity for its current operations.
Item 3. Legal Proceedings
The Company is not a party to any pending legal proceedings which could reasonably be expected to have a material adverse effect on the Company on a consolidated basis, nor are any of the Company’s properties or subsidiaries subject to any such proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 4A. Executive Officers of the Registrant
The names, ages, as of February 28, 2002, and positions of the executive officers of the Company (as of February 1, 2003) are listed below together with their business experience. Executive officers are generally elected annually by the Board of Directors at the meeting immediately prior to the Annual Meeting of Share Owners.
Carlos M. Gutierrez
Chairman of the Board, President and Chief Executive 49
Sam K. Reed
A. D. David Mackay
Executive Vice President and President, Kellogg USA 47
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Alan F. Harris
Executive Vice President and President, Kellogg International 48
Janet Langford Kelly
King T. Pouw
Executive Vice President — Operations and Technology 51
John A. Bryant
Executive Vice President and Chief Financial Officer 37
Lawrence J. Pilon
Executive Vice President — Human Resources 54
Jeffrey M. Boromisa
Senior Vice President and Corporate Controller 47
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| Item 5. | Market for the Registrant’s Common Stock and Related Stockholder Matters |
The information called for by this Item is set forth below and on page 4145 of the Company’s Annual Report in Note 13 to the Consolidated Financial Statements of the Company, which is incorporated by reference into Item 8 of this Report.
Approximately 14,000 shares of Kellogg Company common stock were sold to 5 members of senior management under the Kellogg Company Executive Stock Purchase Plan in February 2002 in a private placement. The Kellogg Company Executive Stock Purchase Plan allows selected senior level employees to elect to use all or part of their annual bonus, on an after-tax basis, to purchase shares of the Company’s common stock at fair market value (as determined over a thirty-day trading period). Kellogg Company received approximately $465,000 under this Plan in 2002, which it used for general corporate purposes.
| Item 6. | Selected Financial Data |
The information called for by this Item is incorporated herein by reference from the chart entitled “Selected Financial Data” on page 2629 of the Company’s Annual Report. Such information should be read in
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| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The information called for by this Item is incorporated herein by reference from pages 1721 through 4528 of the Company’s Annual Report.
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
The information called for by this Item is incorporated herein by reference from pages 44 and 4550 through 52 of the Company’s Annual Report.
| Item 8. | Financial Statements and Supplementary Data |
The information called for by this Item is incorporated herein by reference from pages 2730 through 4549 of the Company’s Annual Report. Supplementary quarterly financial data, also incorporated herein by reference, is set forth in Note 13 to the Consolidated Financial Statements on page 4145 of the Company’s Annual Report.
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
| Item 10. | Directors and Executive Officers of the Registrant |
Directors — Refer to the information in the Company’s Proxy Statement to be filed with the Securities and Exchange Commission for the Annual Meeting of Share Owners to be held on April 26, 200225, 2003 (the “Proxy Statement”), under the caption “Election of Directors,” which information is incorporated herein by reference.
Executive Officers of the Registrant — Refer to “Executive Officers of the Registrant” under Item 4A at pages 6 and 7 of this Report.
For information concerning Section 16(a) of the Securities Exchange Act of 1934, refer to the information under the caption “Security Ownership — Section 16(a) Beneficial Ownership Reporting Compliance” of the Proxy Statement, which information is incorporated herein by reference.
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| Item 11. | Executive Compensation |
Refer to the information under the captions “Executive Compensation” and “About the Board of Directors — Non-Employee Director Compensation and Benefits” of the Proxy Statement, which is incorporated herein by reference. See also the information under the caption “Report of the Compensation Committee on Executive Compensation” of the Proxy Statement, which information is not incorporated by reference.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management |
Refer to the information under the captions “Security Ownership — Five Percent Holders” and, “Security Ownership — Officer and Director Stock Ownership” and “Securities Authorized for Issuance under Equity Compensation Plans” of the Proxy Statement, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
None.
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Item 14. Exhibits, ConsolidatedControls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial StatementsOfficer as appropriate, to allow timely decisions regarding required disclosure based on management’s interpretation of the definition of “disclosure controls and Schedules,procedures,” in Rule 13a-14(c). In designing and Reportsevaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, rather than absolute, assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Within 90 days prior to the date of this report, management carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on Form 8-Kthe foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
There have been no significant changes in the Company’s internal controls or in the other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation. Therefore, no corrective actions were taken.
| Item 15. | Exhibits, Consolidated Financial Statements and Schedules, and Reports on Form 8-K |
The following Consolidated Financial Statements and related Notes, together with the Report thereon of PricewaterhouseCoopers LLP dated January 25, 2002,29, 2003, appearing on pages 2730 through 4549 of the Company’sCompany��s Annual Report to Share Owners for the fiscal year ended December 31, 2001,28, 2002, are incorporated herein by reference:
(a) 1. Consolidated Financial Statements
Consolidated Statement of Shareholders’ Equity for the years ended December 28, 2002, and December 31, 2001, and 2000. Consolidated Balance Sheet at December 28, 2002 and December 31, 2001. |
Consolidated Statement of Earnings for the years ended December 31, 2001, 2000, and 1999.
| Consolidated Statement of Cash Flows for the years ended December 28, 2002, and December 31, 2001, and 2000. Notes to Consolidated Financial Statements. |
(a)2. Consolidated Financial Statement Schedule
The Financial Schedule and related Report of Independent Accountants filed as part of this Report are as follows:
| Page | ||||
| Schedule II — Valuation Reserves | ||||
| Report of Independent Accountants | ||||
This Consolidated Financial Statement Schedule should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report to Share Owners for the fiscal year ended December 31, 2001.28, 2002.
All other financial statement schedules are omitted because they are not applicable.
| (a)3. Exhibits required to be filed by Item 601 of Regulation S-K |
The information called for by this Item is incorporated herein by reference from the Exhibit Index on pages 1417 through 1619 of this Report.
| (b) Reports on Form 8-K |
None
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Schedule II — Valuation Reserves (in millions)
| 2001 | 2000 | 1999 | |||||||||||
| Accounts Receivable — Allowance for Doubtful Accounts: | |||||||||||||
| Balance at January 1 | $ | 8.6 | $ | 8.6 | $ | 12.9 | |||||||
| Acquisition adjustment | 5.9 | — | — | ||||||||||
| Additions charged to expense | 4.1 | 1.8 | 0.6 | ||||||||||
| Doubtful accounts charged to reserve | (2.8 | ) | (1.5 | ) | (4.2 | ) | |||||||
| Currency translation adjustments | (0.3 | ) | (0.3 | ) | (0.7 | ) | |||||||
| Balance at December 31 | $ | 15.5 | $ | 8.6 | $ | 8.6 | |||||||
| Deferred Income Tax Asset Valuation Allowance: | |||||||||||||
| Balance at January 1 | $ | 36.1 | $ | 61.8 | $ | 68.6 | |||||||
| Additions charged to income tax expense | 5.2 | 3.3 | 15.6 | ||||||||||
| Deductions credited to income tax expense | (4.6 | ) | (29.0 | ) | (22.4 | ) | |||||||
| Balance at December 31 | $ | 36.7 | $ | 36.1 | $ | 61.8 | |||||||
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| 2002 | 2001 | 2000 | |||||||||||
| Accounts Receivable — Allowance for Doubtful Accounts: | |||||||||||||
| Balance at January 1. | $ | 15.5 | $ | 8.6 | $ | 8.6 | |||||||
| Acquisition adjustment | — | 5.9 | — | ||||||||||
| Additions charged to expense | 2.7 | 4.1 | 1.8 | ||||||||||
| Doubtful accounts charged to reserve | (2.7 | ) | (2.8 | ) | (1.5 | ) | |||||||
| Currency translation adjustments | 0.5 | (0.3 | ) | (0.3 | ) | ||||||||
| Balance at December 28, 2002 and December 31, 2001 and 2000 | $ | 16.0 | $ | 15.5 | $ | 8.6 | |||||||
| Deferred Income Tax Asset Valuation Allowance: | |||||||||||||
| Balance at January 1. | $ | 36.7 | $ | 36.1 | $ | 61.8 | |||||||
| Additions charged to income tax expense | 3.4 | 5.2 | 3.3 | ||||||||||
| Deductions credited to income tax expense | (5.4 | ) | (4.6 | ) | (29.0 | ) | |||||||
| Balance at December 28, 2002 and December 31, 2001 and 2000 | $ | 34.7 | $ | 36.7 | $ | 36.1 | |||||||
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To the Board of Directors
Our audits of the consolidated financial statements referred to in our report dated January 25, 2002,29, 2003, appearing in the 20012002 Annual Report to Shareholders of Kellogg Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
| /s/ PRICEWATERHOUSECOOPERS LLP |
Battle Creek, Michigan
1112
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, this 25th14th day of March, 2002.2003.
| KELLOGG COMPANY |
| By: | /s/ CARLOS M. GUTIERREZ |
| Carlos M. Gutierrez | |
| Chairman of the Board, President and | |
| Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Name | Capacity | Date | ||||||
| /s/ CARLOS M. GUTIERREZ Carlos M. Gutierrez | Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer) | March | 14, 2003 | |||||
| /s/ JOHN A. BRYANT John A. Bryant | March | 14, 2003 | ||||||
| /s/ JEFFREY M. BOROMISA Jeffrey M. Boromisa | Senior Vice President and Corporate Controller (Principal Accounting Officer) | March | 14, 2003 | |||||
| * Benjamin S. Carson Sr. | Director | |||||||
| * John T. Dillon | Director | |||||||
| * Claudio X. Gonzalez | Director | |||||||
| * Gordon Gund | Director | |||||||
| * James M. Jenness | Director | |||||||
| * Dorothy A. Johnson | Director | |||||||
| * L. Daniel Jorndt | Director | |||||||
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| Name | Capacity | Date | ||||||
| * Ann McLaughlin Korologos | Director | |||||||
| * William D. Perez | Director | |||||||
| * William C. Richardson | Director | |||||||
| * John L. Zabriskie | Director | |||||||
| *By: | /s/ JANET LANGFORD KELLY Janet Langford Kelly As Attorney-in-Fact | March | 14, 2003 | |||||
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I, Carlos M. Gutierrez, certify that:
1. I have reviewed this annual report on Form 10-K of Kellogg Company;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
| a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |
| b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and | |
| c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
| a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | |
| b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| /s/ CARLOS M. GUTIERREZ | |
| Carlos M. Gutierrez | |
| Chairman of the Board, President and | |
| Chief Executive Officer of Kellogg Company |
Date: March 14, 2003
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I, John A. Bryant, certify that:
1. I have reviewed this annual report on Form 10-K of Kellogg Company;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
| a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |
| b. evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and | |
| c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
| a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | |
| b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| /s/ JOHN A. BRYANT | |
| John A. Bryant | |
| Executive Vice President and | |
| Chief Financial Officer of Kellogg Company |
Date: March 14, 2003
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| Electronic(E), | ||||||||
| Paper(P) or | ||||||||
| Incorp. By | ||||||||
| Exhibit No. | Description | Ref.(IBRF) | ||||||
| 2.01 | Agreement and Plan of Restructuring and Merger dated as of October 26, 2000 between Flowers Industries, Inc., Kellogg Company and Kansas Merger Subsidiary, Inc., incorporated by reference to Exhibit 2.02 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2000, Commission file number 1-4171. | IBRF | ||||||
| 2.02 | Agreement and Plan of Merger dated as of October 26, 2000 between Keebler Foods Company, Kellogg Company and FK Acquisition Corporation, incorporated by reference to Exhibit 2.03 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2000, Commission file number 1-4171. | IBRF | ||||||
| 3.01 | Amended Restated Certificate of Incorporation of Kellogg Company, incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8, file number 333-56536. | IBRF | ||||||
| 3.02 | Bylaws of Kellogg Company, as | |||||||
| 4.01 | Fiscal Agency Agreement dated as of January 29, 1997, between the Company and Citibank, N.A., Fiscal Agent, incorporated by reference to Exhibit 4.01 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission file number 1-4171. | IBRF | ||||||
| 4.02 | Form of 6 5/8% Note due 2004 related to the Fiscal Agency Agreement described in Exhibit 4.01 above, incorporated by reference to Exhibit 4.02 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission file number 1-4171. | IBRF | ||||||
| 4.03 | Indenture dated August 1, 1993, between the Company and Harris Trust and Savings Bank, incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3, Commission file number 33-49875. | IBRF | ||||||
| 4.04 | Form of Kellogg Company 4 7/8% Note Due 2005, incorporated by reference to Exhibit 4.06 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission file number 1-4171. | IBRF | ||||||
| 4.05 | Indenture and Supplemental Indenture dated March 15 and March 29, 2001, respectively, between Kellogg Company and BNY Midwest Trust Company, including the forms of 5.50% note due 2003, 6.00% note due 2006, 6.60% note due 2011 and 7.45% Debenture due 2031, incorporated by reference to Exhibit 4.01 and 4.02 to the Company’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2001, Commission file number 1-4171. | IBRF | ||||||
| 10.01 | Kellogg Company Excess Benefit Retirement Plan, incorporated by reference to Exhibit 10.01 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1983, Commission file number 1-4171.* | IBRF | ||||||
| 10.02 | Kellogg Company Supplemental Retirement Plan, incorporated by reference to Exhibit 10.05 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission file number 1-4171.* | IBRF | ||||||
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| 10.03 | Kellogg Company Supplemental Savings and Investment Plan, | |||||||
| 10.04 | Kellogg Company International Retirement Plan, incorporated by reference to Exhibit 10.05 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission file number 1-4171.* | IBRF | ||||||
| 10.05 | Kellogg Company Executive Survivor Income Plan, incorporated by reference to Exhibit 10.06 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1985, Commission file number 1-4171.* | IBRF | ||||||
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| Electronic(E), | ||||||||
| Paper(P) or | ||||||||
| Incorp. By | ||||||||
| Exhibit No. | Description | Ref.(IBRF) | ||||||
| 10.06 | Kellogg Company Key Executive Benefits Plan, incorporated by reference to Exhibit 10.09 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission file number 1-4171.* | IBRF | ||||||
| 10.07 | Kellogg Company Key Employee Long Term Incentive Plan, incorporated by reference to Exhibit 10.08 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission file number 1-4171.* | IBRF | ||||||
| 10.08 | Amended and Restated Deferred Compensation Plan for Non-Employee Directors, incorporated by reference to Exhibit | IBRF | ||||||
| 10.09 | Kellogg Company Senior Executive Officer Performance Bonus Plan, incorporated by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission file number 1-4171.* | IBRF | ||||||
| 10.10 | Kellogg Company 2000 Non-Employee Director Stock Plan, incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8, file number 333-56536.* | IBRF | ||||||
| 10.11 | Kellogg Company 2001 Long-Term Incentive Plan, | |||||||
| 10.12 | Kellogg Company Bonus Replacement Stock Option Plan, incorporated by reference to Exhibit 10.12 to the Company’s | IBRF | ||||||
| 10.13 | Kellogg Company Executive Compensation Deferral Plan incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission file number 1-4171.* | IBRF | ||||||
| 10.14 | Agreement between the Company and Janet Langford Kelly dated August 30, 1999, incorporated by reference to Exhibit 10.01 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 1999, Commission file number 1-4171.* | IBRF | ||||||
| 10.15 | Agreement between the Company and | |||||||
| IBRF | ||||||||
| 10.16 | Additional Agreement between the Company and Alan F. Harris, incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Commission file number 1-4171.* | IBRF | ||||||
| 10.17 | Agreement between the Company and David Mackay, incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Commission file number 1-4171.* | IBRF | ||||||
| 10.18 | Agreement between the Company and Carlos M. Gutierrez, incorporated by reference to Exhibit 10.01 to the Company’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2000, Commission file number 1-4171.* | IBRF | ||||||
| 10.19 | Agreement between the Company and Lawrence Pilon.* | E | ||||||
| 10.20 | Agreement between the Company and other executives, incorporated by reference to Exhibit 10.05 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, Commission file number 1-4171.* | IBRF | ||||||
| 10.21 | Stock Option Agreement between the Company and James Jenness, incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-8, file number 333-56536.* | IBRF | ||||||
| 10.21 | Kellogg Company 2002 Employee Stock Purchase Plan, as amended and restated as of December 5, 2002.* | E | ||||||
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| Electronic(E), | ||||||||
| Paper(P) or | ||||||||
| Incorp. By | ||||||||
| Exhibit No. | Description | Ref.(IBRF) | ||||||
| IBRF | ||||||||
| 10.23 | ||||||||
| 10.24 | Kellogg Company | |||||||
| 10.25 | Kellogg Company | |||||||
| E | ||||||||
| 13.01 | Pages | E | ||||||
| 21.01 | Domestic and Foreign Subsidiaries of the Company. | E | ||||||
| 23.01 | Consent of PricewaterhouseCoopers LLP. | E | ||||||
| 24.01 | Powers of Attorney authorizing Janet Langford Kelly to execute the Company’s Annual Report on Form 10-K for the fiscal year ended December | E | ||||||
| 99.1 | Section 906 Certifications by John Bryant. | E | ||||||
| 99.2 | Section 906 Certification by Carlos Gutierrez | E | ||||||
| * | A management contract or compensatory plan required to be filed with this Report. |
The Company agrees to furnish to the Securities and Exchange Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of the Company and its Subsidiaries and any of its unconsolidated Subsidiaries for which Financial Statements are required to be filed.
The Company will furnish any of its share owners a copy of any of the above Exhibits not included herein upon the written request of such share owner and the payment to the Company of the reasonable expenses incurred by the Company in furnishing such copy or copies.
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